Ministry Fundraising 101 for Board Members

Could your board members pass a pop-quiz on fundraising practices?

 

by Dan Busby and John Pearson

 

Our board paid little attention to how the ministry raised gifts.
We only tracked giving trends.
Then one day, the CEO informed us that we had been sued
for not fulfilling the restrictions for a major gift.
That was the day our board wanted to better understand
our fundraising practices.
 

 

One of the most important roles of a board is to understand the overall fundraising practices for the ministry. Without proper gift funding, most ministries cannot successfully serve the needs of their program recipients.

The board should ensure that the ministry’s fundraising practices are ethical and reflect well on the ministry and its mission.

These six areas are critical for the board to understand:

  1. Temporarily restricted gifts. Most ministries receive temporarily restricted gifts. Some receive only a few of these gifts, while others receive significant levels of them. Though some temporarily restricted gifts are received without any solicitation by the ministry, they are still restricted gifts. Other ministries actively solicit and receive temporarily restricted gifts.

Lawsuits are increasingly filed by givers who believe the restrictions they placed on significant gifts were not honored. Ministry boards are responsible for ensuring that these funds are used in a timely manner for the purposes identified by the giver. Any financial reports received by the board should:

  • Identify any unexpended temporarily restricted gifts and project when the funds will be expended.
  • Indicate the use of restricted gifts during the reporting period in sufficient detail to enable the board to determine if restricted gift purposes are being met.

If temporarily restricted gifts are received and/or solicited for international programs, the board takes on even more responsibility than if the gifts are expended domestically. Why? It is generally much more challenging to provide adequate oversight of international expenditures.

  1. Gift acceptance policy. The board should receive a copy of the ministry’s gift acceptance policy. If no policy exists, one should be adopted.[1]

From time to time, the ministry may be offered donations that compromise the ministry’s ethics, financial circumstances, program focus, or other interests.

A sound gift acceptance policy provides standards and procedures for determining when a ministry will or will not accept a donation. Staff should at least annually confirm to the board that the gift acceptance policy has been carefully followed.

  1. Fundraising techniques. The ministry’s most valuable asset is its good name. If a ministry engages in questionable fundraising practices, it can quickly forfeit a good name that took years to build. The board should know if the ministry is employing fundraising techniques that are coercive, intimidating, or intended to harass potential givers.
  2. Compensation for fundraisers. Does the ministry follow ECFA[2] and AFP (Association of Fundraising Professionals)[3] standards by avoiding compensating internal or external fundraisers based on a percentage of the gifts raised? This unacceptable practice can allow the fundraiser to place his or her own interests ahead of ministry interests. This could jeopardize givers’ trust in the ministry. Performance-based pay that includes pay for reaching certain funding thresholds is allowable as long as it is not based on a percentage of gifts raised.
  3. Charitable solicitation laws. Most states regulate the solicitation of contributions by charitable organizations. Therefore, unless they qualify for an exemption, ministries must register with each state in which they solicit funds. The board is responsible to ensure compliance with the various charitable solicitation laws.
  4. Privacy policy. Except where disclosure is required by law, most ministries have a policy that they will not sell or otherwise make available the names and contact information of givers. The board should understand the ministry’s privacy policy and receive an annual confirmation that the policy is being followed.

Scott Rodin, President of The Steward’s Journey and Kingdom Life Publishing, observes, “As board members, we must understand the ideology/theology behind our development strategy. That will drive our desire for funds to be raised according to Biblical ethics, and used as the giving partner requests. It ensures the integrity and witness of our ministry, and reflects our own integrity as a board. That is the importance of this little chapter and it must not be missed if we are to be a board that does God’s work, God’s way for God’s glory.”[4]

For a ministry that receives a significant amount of charitable gifts, few board responsibilities are more important than providing oversight of the fundraising process. Far too often, boards inappropriately absolve themselves of this duty, assuming these matters are being adequately overseen by the CEO.

 

BOARDROOM LESSON
_______________________________

The board should have a thorough understanding
of the ministry’s fundraising program—both how funds are raised
and how restricted funds are used. If gifts are expended internationally,
the responsibility ramps up exponentially.

  Board Action Steps:

  1. Read: Ask a board member to read and report on The Guide to Charitable Giving for Churches and Ministries by Dan Busby, Michael Martin, and John Van Drunen.[5]
  2. Review: Be sure that giver-restricted gifts are expended on a timely basis and consistently with giver restrictions.
  3. Comply: Confirm that the ministry is in compliance with State Charitable Solicitation laws and its gift acceptance and privacy policies.

 

Prayer

Lord, help our board faithfully carry out its responsibility
to provide oversight of the ministry’s fundraising program. Amen.

 

 

[1] For one example of a ministry’s gift acceptance policy, visit ECFA.org/ Content/Gift-Acceptance-Guidelines in the ECFA Knowledge Center.

[2] “ECFA Standard 7.5 – Stewardship of Charitable Gifts – Percentage Compensation for Securing Charitable Gifts.” ECFA: http://www.ECFA.org/ Content/Comment75 (“An organization may not base compensation of outside stewardship resource consultants or its own staff directly or indirectly on a percentage of charitable contributions raised.”).

[3] “Position Paper: Percentage-Based Compensation.” AFP: http://www.afpnet.org/ethics/ethicsarticledetail.cfm?itemnumber=734 (“AFP holds that percentage based compensation can encourage abuses, imperils the integrity of the voluntary sector, and undermines the very philanthropic values on which the voluntary sector is based.”).

[4] Scott Rodin, “Ministry Fundraising 101 for Board Members,” Lessons From the Nonprofit Boardroom (blog), May 2, 2018, http://nonprofitboardroom.blogspot.com/ 2018/05/lesson-24-ministry-fundraising-101-for.html.

[5] Dan Busby, Michael Martin, and John Van Drunen, The Guide to Charitable Giving for Churches and Ministries: A Practical Resource on How to Handle Gifts with Integrity (Winchester, VA: ECFAPress, 2015).
 

From Lessons From the Nonprfit Boardroom: 40 Insights for Better Board Meetings, 2018, www.ECFA.org/KnowledgeCenter.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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